Sri Lankans protest against the surge in prices and shortage of fuel and other essential commodities near the parliament building in Colombo on Tuesday. AFP

In another setback for the administration, Finance Minister Ali Sabry resigned a day after his appointment and ahead of crucial talks scheduled with the International Monetary Fund for a loan programme.

Rajapaksa dissolved his cabinet on Monday and sought to form a unity government as public unrest surged over the ruling family's handling of the debt-heavy economy that has led to shortages of food and fuel and prolonged power cuts.

A doctors' body also told the government there was an acute shortage of medicines that could collapse the health system.

Politically, the possible next steps could include the appointment of a new prime minister replacing the president's elder brother, Mahinda Rajapaksa, or snap parliamentary elections way ahead of a scheduled vote in 2025.

There was no immediate indication of what was being planned.

Sabry said in his resignation letter to the president that he believed he had "acted in the best interests of the country."

"At this crucial juncture the country needs stability to weather the current financial crisis and difficulties," he said in the letter seen by media, also offering to resign from his parliamentary seat if the president wanted to bring in someone from outside to replace him.

Dozens of protesters peacefully gathered near the residence of the prime minister on Tuesday.

The names of the 41 lawmakers to leave the coalition were announced by party leaders in parliament.

Police stand guard as demonstrators protest against the surge in prices and shortage of fuel near the parliament building in Colombo on Tuesday. AFP

They have now become independent members, leaving Rajapaksa's government with fewer than the 113 members needed to maintain a majority in the 225-member house.

There has been no vote count yet, although Rajapaksa's minority government could find decision-making more challenging.

Independent parliamentarians, however, could continue to support government proposals in the house.

"There are endless shortages of essentials including fuel and cooking gas. Hospitals are on the verge of closing because there are no medicines," Maithripala Sirisena, leader of the Sri Lanka Freedom Party that withdrew its support for Rajapaksa's coalition, told parliament.

"At such a time, our party is on the side of the people."

In a further sign of a desperate shortage of funds, Sri Lanka announced the temporary closure of its embassies in Oslo and Baghdad, and the consulate general in Sydney, from April 30.

The foreign ministry said it was restructuring Sri Lanka’s diplomatic representation due to the "economic situation and foreign currency constraints faced by the country."

The Government Medical Officers Association, which represents over 16,000 doctors nationwide, said there was an acute shortage of medicines, including life-saving drugs.

Sirisena, together with other lawmakers, called on the president and the prime minister to present a clear plan to resolve Sri Lanka's financial mess.

But opposition parties - reflecting the mood of protests sweeping the country of 22 million people - urged the two brothers to step down.

A third brother, Basil Rajapaksa, quit as finance minister on Sunday.

The opposition parties have also rejected a move to form a unity government comprising all parties represented in parliament.

Reuters